By A.U. Asif
NEW DELHI: It is a matter of great joy that three economists have been announced as Nobel laureates this year for their research on the formation of various political and social institutions and their impact on societal development.
These economists explore how and why poor countries have not developed like rich countries despite years of progress. The Nobel laureates have explained the effects of political institutions on society in three ways.
First, how resources are distributed: who has the decision-making power in society? This creates a struggle between the wealthy class and the common people. Second, the public sometimes organizes and threatens the ruling class, thereby making their voices heard by the government. Thus, it can be said that the power of society is not limited to just making a few decisions. Third, there are times when the wealthy ruling class is compelled to grant decision-making rights to the public.
A U Asif
The three Nobel Prize-winning economists of 2024 are Daren Acemoglu (Turkish-American), Simon Johnson (British-American), and James A. Robinson (British). The 2023 Nobel Prize-winning economist, American Claudia Goldin, was awarded for her work in better understanding women’s contributions and roles in the labour market. Goldin had highlighted the discrimination faced by women in the labour market and provided information about their earnings. Indian economist Amartya Sen, who won the Nobel Prize in 1998, received this honour for his scholarly and research contributions to welfare economics and social choice theory. Similarly, the 2022 prize was awarded to three economists for their research on improving the banking sector during economic downturns and suggesting better ways to save humanity.
From the details of these Nobel laureates, it is evident that they have focussed their works towards achieving the welfare of humanity and society. Their contributions are not merely academic; their contributions have been recognized at different times with Nobel awards. However, it seems that a very important and extraordinary issue concerning the welfare of humanity, society, and the state has not come to their attention or has been neglected. This issue is interest, which has economically shackled countries and societies. The common person, especially those living below the poverty line, is suffering greatly from economic exploitation.
Some experts have done significant work on the concept of an interest-free economy, and this research is ongoing. There are also several books on this issue in various languages, including English. One such expert in Islamic economics, H. Abdul Raqeeb, has established a dedicated institution, the Indian Centre for Islamic Finance (ICIF) in New Delhi, for this work. He approached former Governor of the Reserve Bank of India, Raghuram Rajan, and hundreds of others, and apprised them of the benefits of an interest-free economic system to alleviate the conditions of poor people. However, it remains unclear whether the Nobel laureates are aware of the concerns of the common man regarding their social and economic exploitation owing to an interest-based economic system which is currently in vogue globally, and whether the Nobel Committee recognizes this concern while awarding the Nobel Prize on economics every year.
If the Nobel laureates recognize the harmful impacts of this issue, they could engage more actively with the concerns of social advocates like Abdul Raqeeb regarding the interest-free concept.
It is important to note that Abdul Raqeeb is the figure who has repeatedly included an interest-free agenda in the election manifestos of various political parties. He has collaborated with prominent leaders like K.C. Tyagi of Janata Dal (U) and others in this cause. A brief review of Abdul Raqeeb’s well-known book, ‘Islamic Economics and Finance in India: Obstacles and Opportunities,’ specifically the chapter ‘Difference Between Contemporary Financial Systems and Islamic Financial Systems’ (page 293), reveals that the contemporary economic system is interest-based that focus on the generation of profit only, while the interest-free system operates on the principle of profit as well as loss.
Similarly, the contemporary system places greater importance on performance and profitability, while the interest-free system emphasizes justice and equitable principles alongside performance.
The contemporary system is based on the relationship between debtor and creditor, whereas the interest-free system relies on fair collaboration, which occurs between debtors and those in need of loans.
The primary driving force of the contemporary system is interest, where the true meaning of human welfare and social benefit is often disregarded, leading to investments in alcohol, lotteries, lethal weapons, and so on. While the driving force of the interest-free system is also profit, it prioritizes human welfare and social benefit.
In the contemporary system, all financial products are based on interest and loans, whereas in the interest-free system, all production is linked to trade and relates to economic evolution and profit-based production, where responsibility for profit is grounded in ethical principles.
In the contemporary system, investment is linked not to production but based on the sole purpose of earning profit and multiplying money, with no concerns about losses. In contrast, the interest-free system is based on mutual cooperation and collaboration, regardless of any potential losses. This means that even in losses, there is a spirit of mutual support. In the contemporary system, interest continues to accrue if the borrower fails to make payments, while in the interest-free system, non-payment does not impose any additional financial burden beyond the amount loaned.
*This article was first published in Al Ghaus, an Urdu daily published from New Delhi.
